Expensive iPhones — especially the $299 3GS — are doing better than expected in a tough macroeconomic climate. “Customers,” he writes, “have surprisingly opted for higher-end models where they are willing to pay a premium for a faster processor, video recording, more storage, voice control, and other features.”

Apple, expecting a rush on its $99 3G iPhones, underestimated demand for the $199 and $299 models. As a result, there were widespread shortages of nearly all 3GS iPhones through the first weeks of July.

“This is an interesting and arguably counter-economic trend,” he writes, one that should lead to much higher profitability — perhaps as high as 1,000 basis points.

Apple has adjusted its production mix and supplies are improving. Wu is currently modeling 6.8 million iPhones for Q4 — nearly equal to Apple’s runaway fourth quarter last year (6.89 million iPhones) and up 31% from Q3 (5.21 million). It’s a forecast, he says, that could prove to be conservative.

He is picking up signs that Apple’s suppliers could be gearing up to build 9 million to 10 million units.